India: Fixation Of Prices Of Drugs Under The DPCO , 2013: Application Of Para 19 Only In Extra-Ordinary Circumstances

Indian Pharmaceutical Industry is at present, at its most
progressive era where it has witnessed a robust growth over the
past few years moving on from a turnover of approximately US $ 1
billion in 1990 to over US $ 20 billion in 2010 of which the export
turnover is approximately US $ 8 billion. The industry ranks 3rd in
terms of volume and is 14th in terms of value globally.1
It has shown tremendous progress in terms of infrastructure
development, technology base creation and a wide range of products
including pharmaceutical and surgical products.

The Drugs (Prices Control) Order 20132

In May 2013, the Department of Pharmaceuticals, Ministry of
Chemicals and Fertilizers notified the Drugs (Prices Control) Order
2013 ("DPCO 2013") to regulate the prices of 348
essential drugs as mentioned in the National List of Essential
Medicines (NLEM). The DPCO 2013 replaced the DPCO 1995 which
included only 74 bulk drugs within its ambit to regulate their
prices and the pricing of such drugs were fixed on the basis of
manufacturing costs declared by the drug manufacturers.

Fixation of price of drugs under certain circumstances

Paragraph 19 of the DPCO 2013 empowers the National
Pharmaceutical Pricing Authority (NPPA) to fix/ revise the ceiling
price or retail price of any drug which it deems necessary for the
interest of public incase of any extra ordinary circumstances. In
the cases where the ceiling price or retail price of the drug is
already fixed and notified, the Government is empowered to allow
increase or decrease in the ceiling price or the retail,
irrespective of annual wholesale price index for that year.
Further, while executing such powers, in case the NPPA requires to
cause enquiry or call for information, DPCO 2013 confers the power
to the NPPA to do so, if it is considered necessary in public
interest.

NPPA Internal Guidelines for fixation/ revision of the price of
formulations and its effects thereof

In exercise of the powers conferred to the NPPA under Paragraph
19 of the DOCO, the NPPA formulated internal guidelines with an
intention to have a uniform standard for fixation/ revision of
prices of the drugs. As per these guidelines, the NPPA was required
to monitor "inter-brand price differences" of
non-scheduled formulations (formulations which are not under price
control regime) on the basis of monthly Maximum Retail Price (MRP)
based, data to be provided by the IMS-Health. On the basis of MRP
based data, the NPPA used to identify the cases, wherein the MRP of
the price brands exceeds 25 % of the simple average price of the
medicines in that group to initiate the cases for price fixation
under Paragraph 19 of the DPCO 2013. Initially, these guidelines
applied in respect of single ingredient formulations/ medicines
used for anti-cancer, HIV medicines, anti-tuberculosis,
anti-malaria, etc.

Further, the NPPA was given responsibility to examine the cases
of shortages of scheduled and non-scheduled formulations reported
by the State Drugs Controllers or Government, on case to case basis
for fixation or revision of price as conferred under Paragraph 19
of DPCO, 2013.

In July 2013, the NPPA had fixed prices of 50 antidiabetic and
cardiovascular medicines. This was the first time the government
had brought drugs, outside the national list of essential
medicines, under price control (Prices of 652 drugs under NLEM were
fixed by the government last year under DPCO 2013)3.
Various Pharmaceutical organizations have contended that the
internal guidelines issued by the NPPA to regulate/fix the prices
of the drugs under paragraph 19 of the DPCO are erroneous.

Recent order of Government for withdrawal of the internal
guidelines formulated by the NPPA under para 19 of DPCO , 2013

Witnessing such outrageous response from the industry, the
Government realized that the implementation of such internal
guidelines formulated by the NPPA in pursuance of the powers
conferred to it under Paragraph 19 of DPCO, 2013 is extremely harsh
pressure on the Pharmaceutical Industry and its players as it
adversely disturbed and get in the way of the smooth operation of
the industry.

Recently on 22 September 2014, as per directions received from
the Government in the Department of Pharmaceuticals under the
Ministry of Chemicals and Fertilizers vide letter no. 31026/ 53/
2014-PI-II dated 19.09.2014, the NPPA notified to withdraw the
internal guidelines issued by it under Paragraph 19 of the DPCO,
2013 with immediate effect.4

Conclusion

Undoubtedly, it is one of the significant responsibilities of
the Government to consider necessary steps in order to improvise
the health sector of the country, however it is expected that in
doing so, the Government should not overlook those considerable
factors that could prove to be adverse consequences of the post era
of the implementation of such steps in the longer run and should be
diligent in the proper delegation of powers to the authorities.
Although the Government empowered the NPPA to fix/ revise the
ceiling price or retail price of any drug which it deems necessary
for the interest of public and also if required, cause enquiry or
call for information to the companies, however, it is required to
consider that such powers can be exercised only in
"extra-ordinary circumstances" and in "public
interest"

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